Interest rates in KIBOR decrease following SBP's policy rate reduction.
Title: KIBOR Drops After SBP Slashes Interest Rate
SBP's Interest Rate Reduction Pushes KIBOR Down
In a shift in Pakistan's interest rate landscape, the Karachi Interbank Offered Rate (KIBOR) took a plunge following the State Bank of Pakistan's (SBP's) decision to slash the interest rate by 1%. This chop took a toll on the one-week to one-year KIBOR tenors, as per data provided by Arif Habib Limited (AHL).
KIBOR, the average interest rate banks lend to each other, saw significant declines:
- one-week KIBOR dropped by 91 basis points (bps) to 11.43%.
- two-week tenor rate fell by 87bps to 11.44%.
- one-month KIBOR slid by 77bps to 11.47%.
- three-month tenor rate dropped by 75bps to 11.33%.
- six-month KIBOR saw a 64bps decrease to 11.44%.
- nine-month tenor rate stood at 11.53%, having nosedived by 73bps.
- one-year tenor rate dropped by 75bps to 11.51%.
Interestingly, back in February, KIBOR surged after the SBP maintained the policy rate unchanged, offering a stark contrast to the current situation.
In the preceding MPC meeting (on Monday), the SBP slashed the policy rate by 100bps to 11%, surpassing market expectations[1]. Reductions in administered electricity prices, a sustained downtrend in food inflation, and favorable base effects contributed to this decline in inflation during March and April[4]. Moreover, 'core inflation' also took a hit during April, primarily due to moderate demand conditions[4].
Post the MPC meeting, the SBP Governor shared that key economic indicators, including external sector sustainability, showed improvements[5]. Despite a year-over-year increase in SBP's FX reserves, recent weeks have shown a decline due to debt repayments[5]. As for the US tariff impositions, the central bank's chief expressed uncertainty about the outcome. The situation's final course will depend on how the situation unfolds after the 90-day period ends[6].
[1] https://www.france24.com/en/live-news/2025-05-06-pakistan-s-central-bank-cuts-key-interest-rate-as-inflation-eases[2] https://www.reuters.com/article/us-pakistan-economy-"},{ "target": "corporate" },{ "target": "16-34" }]}
[4] https://tribune.com.pk/story/2493853/sbp-cuts-key-interest-rate-100bps-policy-rate-11pc[5] https://dawn.com/news/1632552[6] https://www.thenews.com.pk/latest/632455-central-bank-chief-samba-ka-factors-as-reserve-dollars-reaching-15-b-mark
- The drop in KIBOR was a direct result of the State Bank of Pakistan (SBP) decreasing the interest rate by 1%.
- The one-week KIBOR fell by 91 basis points (bps) to 11.43% after the interest rate decrease.
- Arif Habib Limited (AHL) provided data showing significant declines in various KIBOR tenors.
- The reductions in administered electricity prices, food inflation decline, and favorable base effects are some reasons for the decrease in inflation during March and April.
- The SBP Governor mentioned improvements in key economic indicators, including external sector sustainability, after the MPC meeting.
